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Grading Pharma In 2013: 16 Drug Companies Ranked

How’d Big Pharma do this year? Very well. I decided to give every drug company with a market capitalization greater than $50 billion a letter grade, just like in school. The basis for the grades: I started with stock performance as a basic metric, and then considered each company’s scientific and medical output, whether or not its behavior was ethical, and the general drift of its business. I skipped the medical device giants, Medtronic and Abbott.

I gave one A+, to Bristol-Myers Squibb, based on its overall performance and its pioneering development of cancer drugs that work by priming the immune system. Gilead Sciences would have gotten one, too, were it not for the ethical issues surrounding its stopped collaboration with Bristol in hepatitis C, which I think hurt some patients. I am giving no Ds or Fs. There were no big drug disasters on a par with the recall of Merck’s Vioxx or Pfizer’s Bextra this year. Not even close.

Companies are sorted by the letter grade I gave them, and, where there was a tie, by stock performance. Let me know what I got right – and what I got wrong.

The Best Drug Companies

1. Bristol-Myers Squibb Company

Market capitalization: $87 billionStock appreciation: +61.4%Grade: A+

Sure, the big-cap biotechs delivered better stock performance. But Big Pharmas don’t trade like this, and Bristol’s transformation, started under James Cornelius and continuing under current chief Lamberto Andreotti, has simply been amazing. (Former R&D head Elliot Sigal deserves credit, too.) Bristol is leading the way when it comes to cancer immunotherapy, which Science Magazine named as the breakthrough of the year. It’s smartly jettisoning its diabetes business to focus on what is working. And it is a player in hepatitis C, the other hot area this year. The clincher: this company is consistent. Last year was just as good.

2. Celgene Corporation

Market cap: $67 billionStock appreciation: +107%Grade: A

This maker of high-priced cancer drugs delivered incredibly solid performance, even though its medicines didn’t make headlines outside of the biotech sector. Flagship product Revlimid, descended from its initial testing of thalidomide as a cancer drug, is gaining traction as a long-term therapy in multiple myeloma. Abraxane proved effective – and was approved – in pancreatic cancer. And Pomalyst, another thalidomide descendent, was also approved. Investors are becoming excited about apremilast, for psoriasis, too.

3. Biogen Idec

Market Capitalization: $67 billion
Stock appreciation: +92%Grade: A

The failure of an ALS drug dings Biogen slightly, but it really was a near-perfect year. The launch of MS drug Tecfidera was simply stunning, and Biogen succeeded in getting European protections that will allow it to profit from the medicine there, too. It’s new hemophilia drugs are trucking along.

4. Gilead Sciences

Market capitalization: $113 billionStock appreciation: +100%Grade: A-

Gilead’s purchase of Pharmasset for $11 billion in 2011 is looking like one of the best pharma acquisitions ever. It gave Gilead Sovaldi, a new hepatitis C drug that, as part of a combination pill, could become the new standard of care, helping cure millions of people worldwide from the liver-destroying virus. I would have given Gilead an A+ had it not been for the decision to discontinue a combination of Sovaldi with a Bristol-Myers drug; Gilead’s own combo looks as good in most subtypes of the virus, but not all, and patients now have to wait for an effective combo they might have had earlier if the collaboration had continued. This delay was the best move for Gilead and its shareholders, but not for patients. The worry for investors now: can Sovaldi really be as huge (think $10 billion) as everybody expects?

5. AbbVie

Market capitalization: $86 billionStock appreciation: +59%Grade: A-

AbbVie was supposed to be the less appealing part of Abbott Laboratories, which split itself in two last year. The story was that the pharmaceutical division was dragging down the medical-device-and-baby formula units. But AbbVie has outperformed Abbott for three reasons: its top-seller, Humira for rheumatoid arthritis, continues to perform well; its hepatitis C franchise is the main challenge to Gilead; and its oncology pipeline is delivering.

Trucking Along

6. Roche

Market capitalization: $235 billionStock appreciation: +32%Grade: B+

Roche still seems a bit like two different drug companies. There is Roche, which had saw a major treatment for diabetes and heart disease it had tested in a giant trial fail. And then there is Genentech, which had major drug approvals for Kadcyla, in breast cancer, Perjeta, also in breast cancer, and Gazyva in chronic lymphocytic leukemia. The truth is no company is doing better at developing new cancer drugs. As for the big Swiss drugmaker, well, it’s doing some interesting work in psychiatry. (Update: I’m told Gazvya came from the Roche side; the grade and the observation still stand.)

7. Johnson & Johnson

Market capitalization: $261 billionStock appreciation: +32%Grade: B+

Last year J&J was coping with both with the blaring headlines surrounding the recall of children’s over-the-counter medicines like Tylenol and Motrin and problems with metal-on-metal hip implants. Those problems have abated some, and the pharmaceutical division has been delivering. Xarelto seems to be one of the few new blood thinners not struggling, and Zytiga, for prostate cancer is doing well too.

8. GlaxoSmithKline

Market capitalization: $126 billionStock appreciation: 18.1+Grade: B+

Glaxo had some nice wins at the FDA, bringing to market a combination of drugs for patients with melanoma whose tumors have a particular genetic mutation and new drugs for chronic obstructive pulmonary disease. But it would have won just a B based on the performance of its business. I’m giving it a bump because of Chief Executive Andrew Witty’s attempts at reforming the downside of what it means to be a drug company. After accusations hit that it had bribed doctors in China, Witty decided to stop paying doctors to give talks – the kind of practice that led television personality Dr. Drew Pinsky to hawk a Glaxo antidepressant on radio call-in shows a decade ago. Before that, Glaxo pledged to make the basic data from its clinical trials available to researchers who want it, a big step toward scientific transparency. Maybe Witty’s doing this for show. I wish other drug company CEOs would, too.

9. Amgen

Market capitalization: $85 billionStock appreciation: +30.8%Grade: B

Amgen made a smart purchase, buying Onyx Pharmaceuticals for $10.2 billion in a bid to move into anti-cancer drugs. Other highlights: Good execution on denosumab, for bone cancer and osteoporosis, and solid plans for a business of copycat biotech drugs. There are big hopes for its antibody to PCSK9, which could be the next big cholesterol drug. No reason to jump up and down with excitement, but nothing to frown about, either.

10. Pfizer Inc.

Market capitalization: $199 billionStock appreciation: +23%Grade: B

Pfizer spun off its animal health business, Zoetis, generating investor excitement that the company could complete an even bigger break-up, separating its generic drug business from its pipeline of experimental drugs. The launches of the blood thinner Eliquis, sold with Bristol-Myers Squibb, and Xeljanz, for rheumatoid arthritis, are selling less briskly than many investors hoped. But palbociclib, an experimental breast cancer drug, is looking promising. Trial results from a mid-stage study of palbociclib will emerge in 2014. Also expected: a big trial testing whether its Prevnar 13 vaccine prevents pneumonia in adults.

11. Novartis

Market cap: $189 billionStock apprecition: +22.5%Grade: B

Novartis is a cutting edge oncology company. It is developing the cancer-fighting gene therapy developed by Carl June at the University of Pennsylvania, and that treatment, known as a chimeric antigen receptor immunotherapy. An experimental multiple myeloma drug is also showing promise. Its plan to consider selling off some divisions is smart and shareholder-friendly. What lowered its grade: a research scandal in Japan over studies of Diovan, the blood pressure drug that was its best-seller for years, and lingering questions about manufacturing in its direct-to-consumer business.

Oh, Merck, running so hard to stay in place. This time last year its niacin drug for high cholesterol proved toxic and it delayed filing a key osteoporosis pill with the FDA. Then it announced it was replacing Peter Kim, head of R&D. It later announced that it would cut 8,500 jobs. Next year could be tough, too. The study of Vytorin in heart disease that should read out in 2014 is, to put it kindly, high risk.

No wonder Chief Executive Ken Frazier is having trouble regaining Wall Street’s confidence. But he is doing a lot of the right things: replacing Kim with former Amgen R&D honcho Roger Perlmutter; focusing the labs on a few key programs, including its exciting PD-1 antibody for various cancers, which could be a breakout product; expressing a willingness to spin off animal health or do other shareholder-friendly deals. It’s the sense that Merck is making a real shift that saved it from a lower grade, and that could deliver dividends in the new year.

13. Novo Nordisk

Market capitalization: $75 billionStock appreciation: +7.8%Grade: B-

After years of phenomenal performance as it invaded the U.S. insulin market, Novo was hit by a big setback this year as the FDA told it to conduct more safety trials of a long-acting insulin. Still, the company has a formidable collection of diabetes medicines and is doing fine.

14. Sanofi

Market capitalization: $135 billionStock performance: +7.3%Grade: B-

Sanofi had a great year last year; this year, not so much. I’d like to see more evidence that the R&D turnaround that chief executive Chris Viehbacher and research chief Elias Zerhouni are trying to execute. Going well: the collaborations with biotech Regeneron, including its experimental cholesterol drug that targets the enzyme PCSK9. Not going well: the company keeps missing Wall Street’s earnings forecasts after promising to return to growth, and, like GlaxoSmithKline, it got embroiled in accusations of Chinese bribery.

15. AstraZeneca

Market capitalization: $73 billionStock appreciation: +24.5%Grade: C+

The market seems happy with the performance of new chief executive Pascal Soriot, but I’m not. He made a big bet on Brilinta, the new blood thinner that is similar to Plavix, and sales have increased 208% – to just $75 million in the third quarter. There’s no indication this will be a big drug, especially when there is a Department of Justice investigation looming over its clinical trials. There doesn’t seem to be much of a strategy to the company’s acquisitions, although its big purchase of its diabetes venture with Bristol-Myers Squibb at least makes sense. The pipeline from its MedImmune division is promising, but there needs to be a clearer sense of direction for the company as a whole.

16. Eli Lilly and Company

Market capitalization: $57 billionStock appreciation: +2.4%Grade: C

Over the past decade, Eli Lilly has ceded its leadership in diabetes to Novo Nordisk and Sanofi. Now, patent protection is vanishing for its stable of neuroscience drugs, most notably Zyprexa (gone) and Cymbalta (going). The diabetes business is resurgent, and there’s been some positive movement in cancer. But it seems like every time anyone gets excited about Lilly’s prospects, it’s over a medicine with very slim prospects: solanezumab for Alheimer’s or ramucirumab in breast cancer. And those potential home runs keep getting turned into strikeouts.

An earlier version of this story reversed the order in which Merck and Novo Nordisk appeared. Stock appreciation numbers were calculated through Dec. 18, not the end of the year.

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Not to quibble, but is a B-centered curve appropriate? It may be in light of TRS (with large cap at / slightly above index for 2013), but in terms of long-term sustainability, that feels a bit optimistic.

I think it is. First, it was a good year, stock-wise. Every single one of these companies saw their stock price rise. Nobody did a really terrible job. Even the B- companies mostly did a good job, in my opinion — they didn’t deserve a lower grade. And these are all really Big Pharmas, which can be a lot more sturdy than you’d think. Sure, their stocks can plummet, but they tend to stay in business and get second, third, or even fourth chances. Or else they get bought, delivering investors a premium.

The story here gives a lop-sided review ignoring the nexus of the pharmaceautical companies in-between hospitals/doctors and the health insurance which continue to cause big-financial holes in every pocket of the nations elderly or other sick patients! Medicines/drugs need to help needy people get cured and shouldn’t become a source of business of such pharmaceautical companies. Seniors are the worst in the list of exploitation for minting business in the name of providing medical helps. Look at the fate of those who just can’t afford expensive drugs even though the same could be life saving medicines to maintain health of the seniors. How come drugs of the same brand and manufactured by the same company could be sold at a cheaper cost just across US border in Canada or elsewhere whereas the same could be priced twice or more of the cost for the same in the US itself? There ought to be some standards/price controls in sale of such medicines in the US and the things shouldn’t be left to the unilateral exploitative methods of the nexus coated pharamaceautical/health insurance companies.

Hello Matthew Herper, although you have enlisted a great list of drugs and the name of the manufacturer but don’t you think that, it has been hurriedly done. It has been proved that drugs companies disclosed the reality. They are telling you the naked lie and are snatching all your money. They don’t have the guts to tell you that, like “cancer”, many deadliest diseases cannot be cured by these drugs. Actually these companies are doing business and nothing else.

The ranking is based on revenue and that is fine. However I would like the ranking done differently and it is based on how many people can afford these drugs globally. In my opinion drug has value if it can serve and be used by e.g. 50-100 million people without any co-pays. With co-pays, the drugs are subsidized and very high percentage of patients cannot afford them.

This title of “Best Drug Companies” in 2014 is a bit of misnomer in one sense. For example, how will employees feel about working in such companies. I have got to think somebody working in Pfizer, especially in R&D feels rather differently than Amgen and both companies got B OR am I off?

For the purpose of this list, I don’t care whether a scientist working on Amgen’s PCSK9 antibody feels different than one working on Pfizer’s PCSK9 antibody. I did expect more stock appreciation from big biotechs (GILD, CELG, AMGN, BIIB), than from pharmas (PFE, BMY, MRK, AZN).

Thanks, but my point is similar to the other comment you just made in response to motogp61. You say that Bristol is doing well now just because they went through a difficult restructuring a decade ago. Pfizer & Merck is going through a difficult restructuring now, and if you ask committed employees in these companies how they feel working there in current scenario and whether or not they think these companies made the Top 15 cut, you will likely get quite pessimist responses. Having had first hand experience and If i ask many current PFE employees, it will be hardly close for them to be working for a “Grade B” company, it will be much worse.

I think “Best Companies” blanket statement is off. I will agree more if you say, these are “Best Biopharma companies to return shareholder value in 2013″. The latter makes more sense to me.